METGASCO LTD — Capital/Financing Update 2007

May 8, 2007

9 May 2007

AUSTRALIAN STOCK EXCHANGE Via Electronic Lodgement

DRILLING REPORT

Key Point:

* Strong gas shows from 11 metre thick sandstone zone of interest encountered during drilling operations. DST equipment to be mobilised.

Metgasco (ASX:MEL) advises that the following drilling activity has taken place over the past $week:$

Corella-E7	(Metgasco 85%, CS Energy earning 15%)
Location:	PEL 16, Stratheden Joint Venture Area
Spud Date:	26 April 2007
Status:	Current depth is at 310 metres and preparing to run casing.
Corella-E6 Location: Spud Date: Status:	(Metgasco 85%, CS Energy earning 15%) PEL 16, Stratheden Joint Venture Area 2 April 2007 During coring operations the Company encountered a zone of interest comprising fractured, gas charged sandstone which has exhibited characteristics of a conventional gas reservoir. These included significant overpressuring and strong gas kicks during drilling. The top of the sandstone was encountered at 670 metres and was observed to be approximately 11 metres thick.
	The well has been brought under control and operations will be suspended after temporary cement plugs have been put in place. The Company intends to conduct a DST as soon as the appropriate equipment can be mobilised.
	Coring operations have been completed with the well now drilled to a total depth of 771 metres. Coal core samples totalling 42 metres have been obtained.
Corella -E4	(Metgasco 85%, CS Energy earning 15%)
Location:	PEL 16, Stratheden Joint Venture Area
Spud Date:	29 March 2007
Status:	Suspended pending additional testing.
Corella-E5	(Metgasco 85%, CS Energy earning 15%)
Location:	PEL 16, Stratheden Joint Venture Area
Spud Date:	19 February 2007
Status:	Suspended pending additional testing.

Corella-E3	(Metgasco 85%, CS Energy earning 15%)
Location:	PEL 16, Stratheden Joint Venture Area
Spud Date:	12 February 2007
Status∶	Suspended pending additional testing.
Corella-E1	(Metgasco 85%, CS Energy earning 15%)
Location:	PEL 16, Stratheden Joint Venture Area
Spud Date:	27 January 2007
Status:	Suspended pending additional testing.
Riflebird-E2	Metgasco 100%
Location:	PEL 16
Spud Date:	22 January 2007
Status:	Suspended pending additional testing.
Riflebird-E1	Metgasco 100%
Location:	PEL 16
Spud Date:	15 January 2007
Status:	Suspended pending additional testing.

For further information contact:

David Johnson Glenda McLoughlin

Managing Director Chief Financial Officer

Metgasco Limited
ACN 088 196 383
Level 3, 32 Walker St
North Sydney NSW 2060
Tel: (02) 9923 9100
Fax: (02) 9923 9199
Website: www.metgasco.com.au